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National Mortgage Rates 14 February 2012

Loan Type Today +/- Last Week
15 yr fixed 3.10 3.12
30 yr fixed 3.80 3.81
5/1 ARM 2.73 - 2.73

Rates may contain points

Can You Afford to Buy a Home?

By:
Kara Johnson - MortgageLoan.com

Thinking of becoming a first-time homebuyer? There are certainly a lot of incentives to do so right now, including low prices and mortgage interest rates, plus that $8,000 federal tax credit. But are you ready to take that step?

The biggest question, of course, is can you afford it? But that’s an issue that goes beyond the simple matter of whether you can fit a mortgage payment into your current budget. Do you have enough for a down payment? Have you budgeted for insurance and taxes? What about maintenance costs? If you’re looking at a condo, what about association fees, which may increase significantly over time? There are a lot of other expenses besides the mortgage that go into the issue of home affordability.
 

How much do you really want to spend?

 
The first question is, how much do you really want to spend on a home? Many home buyers jump into buying the nicest home they can afford without really thinking about how it will affect their lifestyle. Do you want to tie up all you extra earnings in a mortgage, or would you like to have more available for things like vacations, entertainment, hobbies and investing for the future? You might conclude you’d be more content with a more modest home that allows you to pursue a more bountiful lifestyle in other areas.
 
Have you saved up enough for a down payment? This goes beyond simply meeting mere minimums – you can get an FHA loan with as little as 3.5 percent down – but do you have enough of a down payment to get the interest rate you need? To get the lowest rates, you’ll likely need a down payment of 20 percent, in addition to excellent credit. Although there are signs that some lenders are beginning to ease their down payment requirements, anything under 20 percent still means you’ll have to pay private mortgage insurance  (PMI) – which is like jacking up your interest rate by another half a percent.
 

Look out for maintenance costs

 
What about maintenance costs? These can be a rude surprise for many new homeowners. On something as big as a house, things are always breaking or wearing out and have to be fixed or replaced. And older homes tend to need more care than newer ones – they’ve had more time for things to wear out. It’s a good idea to have several thousand dollars beyond what you’ve saved for a down payment to hold in reserve for emergency repairs. Expect to average at least a few hundred dollars a month in things that need to or ought to be fixed or upgraded – particular when time comes due for a new roof or furnace.
 
Finally, how stable is your income? Do you feel secure in your job and that you’ll continue to earn as much a few years down the road as you are today? What about your spouse, if you’re counting on their income? In today’s economy, it’s a major concern. Also, what other expenses might crop up down the road? Can you handle an unexpected outlay for a new car if your current one gives out? Do you have children whose needs will increase as they get older?  All these need to be taken into account.
 
Becoming a homeowner can be one of the best investments you’ll ever make for yourself and your family. But to make sure it turns out that way, you need to take a careful look at all the economic angles to make sure it’s a good fit for both you and your budget.

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